Lord Pearson of Rannoch: My Lords, before my noble friend sits down, I wonder whether she could clarify the confusion in my mind as a result of her remarks. She said that she regarded the single market as a great achievement; indeed, one of the greatest achievements of the Conservative Party, and so on, in Europe. But later she castigated--and rightly so--the droit de suite legislation, which is contributing to the destruction of our extremely important international art market.

My noble friend might also have mentioned another current directive--the take-over directive--which is in the process of destroying our mergers and acquisitions industry in the City of London. My noble friend is surely aware that these two directives come straight from the single market: they are single market legislation with qualified majority voting. Can she tell us, briefly, what advantages she sees in the single market that we could not have had from the common market?

Baroness Rawlings: My Lords, my noble friend mentioned two pieces of legislation. Unfortunately, all is not perfect even in the best of all possible worlds. When I was in the European Parliament, there was much legislation with which we did not agree and which we did not like; but we were in opposition and were voted down every time. As long as there is the possibility of being voted down, pieces of legislation that I would consider as not being free market--indeed, not reflecting the original idea that my noble friend Lord Cockfield had in the Single European Act--are those that we would not pass.

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8.33 p.m.

The Parliamentary Under-Secretary of State, Foreign and Commonwealth Office (Baroness Scotland of Asthal): My Lords, I, too, want to pay tribute to the work of the members and staff of the sub-committee, many of whom we were privileged to hear from this evening. In particular, I am mindful that it was the last report presided over by the noble Lord, Lord Grenfell, before his departure from this House. The report displays all the expertise and careful scrutiny that this House came to expect from the sub-committee during the noble Lord's tenure as its chairman. He will be a hard act to follow. However, as the noble Lord, Lord St John of Bletso, so ably demonstrated, I am sure that the committee will none the less continue to show a deep and perceptive interest in the Government's dealings within the European Union. I am confident that my noble friend Lord Tomlinson will be more than able to meet the challenge as chairman.

Perhaps I may say straight away that the Government welcome the report; and not just because we have identical views on the significance of enlargement. The report was undertaken because of the committee's concern that the enlargement process might be slowing down. I hope that the evidence taken by the committee has demonstrated that this is not the case. This is not by any means to say that the Government are complacent about enlargement. On the contrary, the United Kingdom has long played a leading and constructive role in EU enlargement. The Prime Minister galvanised the process in May when he called for the Helsinki European Council meeting to invite six more countries--Latvia, Bulgaria, Lithuania, Romania, Slovakia and Malta--to begin negotiations. I am confident that this weekend the Council will now do so.

Perhaps I may reassure the noble Lord, Lord Wallace, that the Prime Minister has committed both time and effort to this issue. Indeed, if one were to listen to some elements of the media, he concentrates on nothing else.

As the Government's response to the report recognises, an information and media strategy on enlargement is necessary, especially as negotiations near their close. This is necessary both in member states and in acceding states. The UK has a role to play in this. I am pleased to say that the Prime Minister has written an article for the press for publication this week about the six countries that are joining negotiations in the new year. The article emphasises the support of Her Majesty's Government for enlargement and the welcome that awaits their countries in the European Union.

In emphasising the importance of enlargement, the committee's report says--I do not hesitate to quote this, although it has been mentioned by other speakers:

"We have consistently supported enlargement of the European Union to bring in the countries of Central and Eastern Europe since it first became possible as a result of the political changes in those States. We believe that after the recent events in the Balkans it is now even more important to seize the moment--the term 'political imperative' is, for once, not out of place".

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I could not agree more. I very much wish to welcome the comments made by the noble Lord, Lord Moynihan, about the importance of using enlargement as an opportunity to heal the divisions and reap the fruits of peace. Coming from Opposition Benches, those were indeed welcome words. The pledge made of the Loyal Opposition's support for enlargement, echoed by the noble Baroness, Lady Rawlings, was also warming to this side of the House; indeed, I dare say, to all sides of the House.

I am most grateful for the sage good sense of the noble Lord, Lord Cockfield, who has such a comprehensive command of the historical challenges with which we have all had to grapple over the past 30 years. I very much welcome his endorsement: I believe he referred to the same diagnosis but a different remedy.

We will continue to maintain the pressure for enlargement. Enlargement is not only good for the applicant and member states; it is also good for the future of the European Union. In inviting new states to join the EU, we offer these countries the prospect of political stability and economic growth that we in Western Europe have enjoyed for many decades. I cannot but agree with my noble friends Lord Harrison and Lord Tomlinson, the noble Lord, Lord Wallace, and many other speakers who emphasised the benefits of enlargement in terms of the enhancement of stability and prosperity in Europe.

Promoting enlargement is a policy with a clear ethical dimension. We have all witnessed the terrible suffering and injustice that have taken place in the former Yugoslavia. We are all aware that Turkey still does not meet the Copenhagen criteria for membership in areas such as human rights and its treatment of minorities. Even some of the applicant countries only recently met these Copenhagen political criteria. The prospect of EU accession is a clear catalyst for political and social change. We are bringing countries that used to lie behind the Iron Curtain fully into the political, economic and cultural life of the European Union. It is the most important policy that the EU could pursue. I am glad to say that it is being pursued vigorously and that the United Kingdom is at the forefront of this process. The noble Lord, Lord Tomlinson, need have no fear that the Copenhagen criteria will be diluted. Adherence to their principles secures the goals that we all seek. Neither shall we shirk from the difficult choices, as the noble Baroness, Lady Sharp, fears.

It would not surprise any close observer of the proceedings of this House to note that noble Lords have identified with their usual acuity the most complex issues facing us in the enlargement process. The noble Lords, Lord St. John of Bletso and Lord Moynihan, and the noble Baroness, Lady Williams, and, for different reasons, the noble Lord, Lord Biffen, have emphasised the committee's concerns about transitional periods. The noble Baroness, Lady Williams, and the noble Lord, Lord Shore, raised the related issue of transitional arrangements in agricultural markets, together with the noble Lords,

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Lord Boardman and Lord Hussey, just to mention two others, and particularly the reform of the common agricultural policy.

A number of noble Lords, including the noble Lord, Lord Harrison, mentioned concerns about the impact of Turkey's candidacy. The noble Lord, Lord Tomlinson, and the noble Baroness, Lady Williams, highlighted the many questions of institutional reform which arise directly out of the enlargement process and asked whether there are funds available to enable enlargement to be successful. It will come as little surprise to anyone who has been involved in the European debate to note that the noble Lords, Lord Biffen, Lord Pearson and Lord Shore, suggested that we were on a hiding to nothing, that disaster faced us and that the dangers of enlargement were so great as to give us pause for thought that it might never happen.

I should deal with the one area where we do not entirely share the committee's opinion. The committee's sense that the Government have hardened their stance on the issue of transition periods for the implementation in full of the EU acquis communautaire is unfounded. I was delighted that the noble Lord, Lord St John of Bletso, was able, on behalf of the committee, to accept that it was wrong in that regard. It is clearly desirable that new member states should implement the acquis in full as soon as they join. We shall continue to urge them to do so. But we subscribe to the common EU negotiating position which allows that in certain circumstances transition periods may be necessary. It makes clear that,

"Such requests for any transitional measures shall be limited in time and scope, and accompanied by a plan with clearly defined stages for application of the acquis".

The United Kingdom has agreed this mandate and will continue to adhere to it. This means that we shall look sympathetically at requests for time-bound transitional periods where a sensible case can be made.

I respond to a point made by the noble Lord, Lord St. John of Bletso. As the noble Lord recognised, transitional periods played an important part in all previous accessions. They are a tried and trusted means of integrating new member states into European Union policies in an orderly fashion, but in no previous accession did this lead to a two-tier Europe. New member states have always played a full role in decision-making in the European Union from the moment they joined. This applied as much to areas where the new members enjoyed transitional periods as to policies where they took on board the full acquis from day one. While I concede that there may be areas of policy where the applicants will not implement EU legislation in full for a temporary period, I do not think that this amounts to a two-tier Europe. After all, we do not want to imply that what is on offer is some kind of second-class citizenship.

I respond to a point raised by the noble Baroness, Lady Williams of Crosby. She mentioned the important issue of the impact of enlargement on industry in applicant countries. The objective of enlargement is to extend prosperity to the acceding countries, not impoverish them. That is why the Copenhagen economic criteria which applicants must

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meet by accession include the ability to cope with the competitive pressures of the single market. Of course once they have acceded, the applicants will have access to the European Union structural funds. These are precisely designed to help countries cope with the social and economic pressures arising from the need for industrial restructuring. This is in addition to the substantial pre-accession aid that the applicants will receive.

The noble Lords, Lord Shore and Lord Boardman, among others, expressed acute concern at the common agricultural policy. The Berlin European Council agreed important reforms to the common agricultural policy. EU farm support prices were reduced, bringing them closer to levels in the applicant countries. This will make accession easier. Berlin also set aside funds to finance the common agricultural policy in the new member states. The funds will finance the common agricultural policy market support measures such as intervention and export subsidies. But no provision was made for direct payments for their farmers. Instead the EU decided to focus its aid on promoting structural adjustment in the applicant countries, including in the environmental area, rather than on paying subsidies to their farmers. Berlin set aside substantial structural funds for the new member states. By the year 2006 these would be worth 12 billion euro a year. That is roughly equivalent to 4 per cent of the combined GNP of the six countries currently in negotiations.

The Government believe that further common agricultural policy reform is highly desirable and will continue to argue the case strongly. I understand the concerns raised by the noble Baroness, Lady Sharp of Guildford, and others with regard to the World Trade Organisation negotiations. Despite the absence of an agreement at Seattle last week to launch a comprehensive round of trade negotiations, negotiations on agricultural liberalisation will begin under WTO auspices in January next year.